September 18, 2025 • 17 mins
Wall Street's bets that Federal Reserve rate cuts will keep powering Corporate America drove stocks to all-time highs, with traders piling into the riskier corners of the market. The S&P 500, Nasdaq 100, Dow Jones Industrial Average and Russell 2000 small-cap index all closed at fresh highs on Thursday, for the first time since November 2021. An MSCI index of global stocks also closed at a record. We look at the market landscape with Shams Afzal, Managing Director at the Carnegie Investment Counsel.
Plus - Fed Chair Jerome Powell managed against the odds to forge a near-unanimous consensus at this week's policy meeting, with new Governor Stephen Miran the only one to vote against the quarter-percentage-point interest-rate cut. Miran, a close ally of President Donald Trump who was just sworn into a temporary Fed position on Tuesday, dissented in favor of a larger reduction — something the president has been demanding for months. In her latest column, Bloomberg Opinion's Shuli Ren writes that one thing is clear following Miran's appointment: the dollar will get a lot weaker. She joins us to explain.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. The US equity market
climbed to all time highs in the last session. That
was after Wednesday's FED raid cut, and money flowed into
(00:21):
riskier corners of the market. Look at small cap shares,
they simply soared. We had the Russell two thousand jumping
two and a half percent, closing at its first record
high since twenty twenty one. Now this index is home
to some of the riskiest and most indebted companies in
the market. At the same time, today, we had the Dow,
the S and P and the Nasdaq finishing at records.
(00:42):
In a moment, we'll take a look at how Stephen
Myron's appointment to the FED could lead to a weaker
dollar and benefit em currencies. I'll be joined by Bloomberg
opinion columnist Shuley Wrenn, but we begin here in the States.
Joining me now is sham zavsal Managing director at the
Carnegie Investment Council. Chams is on the line from Toledo, Ohio.
(01:03):
Thank you so much for making time to chat with me.
It's very interesting to look at what happened in the
bond market today. Yes, we had a rally in equities,
but yields were up across the curve. And this seems
to be tied to the idea Chams that the Fed
is going to allow the economy to run hot. Is
there some danger here though.
Speaker 2 (01:22):
There could be. I'm not quite there yet in terms
of overreacting to a single day move, but it can
be very much interpreted that way. So if you look
at the dot plot, obviously from yesterday, while we did
get an extra cut expected for this year from a
concessus standpoint, twenty twenty six is really essentially flat, right.
(01:45):
If you look at the consensus for twenty twenty six,
most people are still gravitating towards barely any movement from
where they leave off in twenty twenty five. So that
should potentially keep things in check. But you know, the bondmark,
it has widely been known as be home for more
sophisticated investors than equity, so we have to pay attention
(02:06):
that we cannot ignore the bond market.
Speaker 1 (02:07):
Of course, Yeah, Powell call this move a risk management cut,
but he also reiterated the danger of those tariff hikes
creating a persistent uplift in inflationary pressures. And that's I
think maybe what was being expressed in the Wednesday session
after the Fed's decision, because we also had yields pushing
a little higher. Are we looking at a situation where
(02:30):
stagflation is a possibility?
Speaker 2 (02:34):
You know, it depends. You know, when we think about
the spending of where it's coming from. One dollar worth
of spending is the same, you know, whether it comes
from one source or five different sources. Right, So, while
we are not so enthused with the idea that the
AI team is really worth powering a good chunk of
the economy, but you know, generally GDP calculation will be
(02:57):
fairly neutral to where this boost comes from. My assessment
is that for stacklation to truly take shape, we're going
to have to a c change in terms of the
hype that we have seen over the last couple of
years towards data center build out. That number is so
substantially high. The fact that it's likely going to touch
(03:20):
one percent of US GDP, most likely in twenty twenty
six keeps me at bay from thinking that stackflation is
around the corner. But I wouldn't be betting that we're
going to skirt by a recession over the next twelve months.
Speaker 1 (03:35):
Either, well, let's stay with that. I'm wondering whether or
not you believe, given the ferocity of investment in AI infrastructure,
whether investors are going to see an ROI a return
on investment.
Speaker 2 (03:48):
Well, I think the corporations themselves are seeing it. Now.
I'm not speaking about the owners of the lms at
this point because that's a whole different story altogether. But
when you see the way really Fortune five hundred is
deploying these things, Obviously there's customer service, and then there
is the sort of the first level, brand new graduate
(04:11):
analytical abilities. These are the areas where you're going to
see a lot of weakness, I think over the next
couple of years in terms of the job market, because
that's where I think this suset some of the substantial
gains in productivity is going to come from. Whether you
look at whether it's the health insurance industry, whether it's
just a simple chat bot being deployed across the board,
(04:33):
or the agentic AI, the no code AI agents that
are being deployed to handle a variety of tasks across
the board. I think there's some significant productivity gains awaiting
around the corner. So I think Fortune five hundred is
pretty good. As far as the small businesses that may
be still running on Windows eleven, excuse me, windows ten
(04:56):
or older, I think there's going to be a significant
dichotomy between how the rest of America ends up using
the advancements in AI versus how Fortune five hundred ends
up using.
Speaker 1 (05:08):
Well, speaking of small companies, we had a rally in
the Russell two thousand today. It was up about two
and a half percent, as I indicated a moment ago.
Give me your sense on whether this was a little
bit of a short squeeze here or whether the market
is genuinely convinced that there is going to be kind
of a resurgence and some time of economic activity that
(05:29):
would justify pushing small cap stocks higher.
Speaker 2 (05:32):
Well, you know, it's probably not a great idea to
read too much into a single day move, but you know,
as you mentioned that Russell two thousand is home to
a lot of unprofitable companies and therefore risk your companies,
high speculation biotech, and frankly a lot of regional banks
and mortgage companies for that matter. I think the way
(05:56):
we are sort of absorbing this turn of events is
essentially to say that look from a historical perspective, when
the FETs have cut raid, they have generally done it
when it's already too late. So historically speaking, you would
have found over the last thirty forty years that a
rate cut happens and then we slide into a recession.
I think Chairman Powell is going to be one of
(06:18):
those you know, people celebrated, I think in later years,
because he has had now three different incidents where he's
had the chance to raise rates. The first two times
he did not drive the economy into a recession. We'll
see how it looks this time around. My sense is
that goldilocks economy that's growing at around one point seven
(06:39):
to one point nine percent, Corporate America still crunching in
double legit, you know, profit gains, obviously aided by the
weaker US dollar. All of this does lend itself to
Russell two thousand finally catching you know, some some ray
of sunshine. So I think there's some leg some lamentum
that could build up if you do at a goldilocks economy.
(07:02):
While we are expecting rate cuts at least four rate
cuts between now and maybe summer of next year.
Speaker 1 (07:08):
So what about the broader equity market today S and
P five hundred at a record high and the pe
of around twenty five times earnings, That seems to be
a little frothy.
Speaker 2 (07:20):
Very much so. Obviously, the waiting on megacaps is also
the highest event since frankly eighteen nineties. If you go
back to the last fifty years, on average, the top
ten names by market cap has trended around twenty five
to twenty eight percent. As of July of last year.
The last time I took a look at this, the
(07:41):
top ten names comprised of thirty eight percent of the index. Right,
so if the mega caps that are all participating in
this AI hiph are going to be the ones to
be the largest names within an index, you can imagine
why we're going to get a little bit stretched on
the valuation front. Thing that still concerns me as much
(08:02):
because the rest of the index is really around nineteen
to twenty times, and that's manageable. If you know you
had seven or eight sectors out of the eleven all
trading over twenty twenty one time's earnings, that would be
more reason to worry than frankly, knowing that the market
is concentrated, and as long as the AI boom is happening,
(08:23):
you could look the other way. But boy, watch out.
When this hardware build out is about to complete its
full cycle, that's when the concentration may not be working
for investors as much.
Speaker 1 (08:35):
So having said all of that, chums, give me an
investment strategy that you think will be effective over the
next six to twelve months.
Speaker 2 (08:44):
Well, I would say that mega center banks are going
to be, you know, a good place to invest at
this point. The valuations are not eye watering, and I
think between the prospect of just having a better spread
in net interest margins as well as the prospect of
(09:04):
deregulation over the remainder of the term from the administration,
both votes well for financials. Obviously, I think we are
still early stage in AI. So to the extent that
you were able to find names that have not completely
certain gotten blown off with this eyewatering rally, I think
(09:26):
there may be some deals there. I think AMD may
have given us an opportunity today as a result of
the news between Nvidia and Intel, and so a pockets
of opportunity within tech, certainly financials, and I wouldn't completely
ignore consumer discretionary at this point because the first half
(09:47):
was very subdued in terms of economic participation. I think
the second half will be much better, and we think
twenty twenty six may actually carry the momentum. So there
should be some really strong name, both in retail or
otherwise within the discretionary sector that can really make, you know, investors,
you know, goals come through for the next year.
Speaker 1 (10:08):
What about foreign markets? We have President Trump returning from
the UK, A lot of big tech deals were just announced.
Are you inclined maybe to look for opportunities outside of
the US right now?
Speaker 2 (10:20):
You know, it's we have really been underweight in international
as a firm for the longest time. And while we
felt that, you know, maybe a year ago Mexico would
have been an opportunity and maybe some parts of Asia
would have been post tariffs, we're not so sure. And
(10:42):
when we look at our multinationals here and how they
are speaking about where the momentum is across the world,
we're not really seeing bright spots out of really any
place in Europe. Perhaps maybe Poland into some degree, but overall,
you know, it's a very much a very tepid market
(11:04):
that is basically burdened by excessive regulation. And so we're
just going to be waiting and seeing on whether there's
a truly sort of a change of mindset in terms
of how they think through the next twenty thirty years. Otherwise,
I think the US remains the best bank for the
buck as far as we're concerned.
Speaker 1 (11:22):
Okay, Shams, we'll leave it there. Bank for the buck
in the US. Shams Avzal is Managing director at the
Carnegie Investment Council. Joining us on the line from Toledo,
Ohio here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Krisner. Now, the fed's
(11:45):
recent decision to cut its policy rate by a quarter
point was nearly unanimous. The newly installed Governor, Stephen Myron,
though dissented in favor of a half point reduction. Now
that is something President Trump has been demanding for months.
Myron was sworn into the fed's board on Tuesday morning,
just in time for the meeting. He has taken unpaid
(12:06):
leave from his role as chair of the White House
Council of Economic Advisors to help us understand what Myron's
new role may mean for markets. I'm joined by Bloomberg
opinion columnist Shuley Wren, who joins us from Hong Kong.
Surely it's always a pleasure. Thank you so very much.
I know you're writing about Myron's policy where the dollar
is concerned. Fill me in a little bit.
Speaker 3 (12:28):
He's definitely a dollar beer.
Speaker 4 (12:30):
He blamed the US society's various economic problems, from the
loss of manufacturing to wealth inequality.
Speaker 3 (12:38):
To the overvaluation of dollar.
Speaker 4 (12:41):
In a very well read paper published the last November.
He basically called that He basically said that the dollar
is overvalued and that it should not be acting as
a reserve currency. And that's very much freaking global investors out.
Like what we're seeing is that the FED was holding
(13:02):
the raids right throughout this year until Wednesday, but the dollar,
the Broader Dollar Index has come down twelve percent already.
Speaker 1 (13:12):
Do you think he's likely to have much in a
way of influence while he's sitting on the FED Spoard
of Governors.
Speaker 3 (13:19):
He is only one of the seven members.
Speaker 4 (13:21):
However, his rhetoric and the fact that the Trump will
get to decide on the next feed chre does do
influence market narratives, and you are actually seeing it already.
Speaker 3 (13:35):
For instance, Goal is on.
Speaker 4 (13:37):
Trying to take over US treasuries as a global central bank's.
Speaker 3 (13:41):
Biggest reserve assets.
Speaker 4 (13:43):
That's a sign that the global investors are trying to
hatch against the instability at the federal reserve. And also
what you are seeing is that the global asset managers
are increasingly keen to diversify overseas into international stocks, from
Europe to Hong Kong.
Speaker 1 (14:04):
So, to be fair, surely the dollar has been in
a bit of a down trend for much of the year.
How much of that is due to forces maybe that
Myron or anyone else would not be able to control.
Speaker 4 (14:17):
I think that's a very fair question. What you see
with dollar is that it tends to exhibit very long
term major cycles, with the boom and the bus faces
lasting over a decade. So it does seem that the
dollar has peaked somewhere in twenty twenty two, and the
consensus is that, you know, after the last boom, which
(14:40):
lasted over a decade, the dollar may be entering a
bar face. I will only say that the Trump's economic
policies and his attitude towards the Federal Reserve is speeding
up that decline.
Speaker 1 (14:52):
So I mentioned that Myron is on lee from his
role as chair of the White House Council of Economic Advisors.
And we know a cornerstone of Trump's economic policies have
to deal with tariffs. And I'm wondering whether we need
to talk a little bit about the tariff story as
it relates to the dollar as well.
Speaker 3 (15:09):
Well.
Speaker 4 (15:10):
And that's another problem, right, Like in the past, a
lot of foreign governments they ended up holding a lot
of dollar because they were exporting their goods and services
into the United States. But if the terror boar is
set up, there is less need for them to hold
dollar anymore. In fact that there will be in the
case of China, there will be few opportunities to earn dollar.
Speaker 3 (15:33):
Right.
Speaker 4 (15:33):
That means that there is a lot of selling pressure
on the green back.
Speaker 1 (15:38):
So if we step back and we look at the
shift that is happening right now in global markets, is
this a time where many, I will say, especially institutional investors,
are diversifying, and perhaps some of that diversification is moving
assets out of the US.
Speaker 4 (15:54):
I think we are already seeing that already Europe and
China have been doing very well this year. And it's
also in part because the US dollar market has become
very expensive, right Like if the AI boom is not
showing up in the earnings in say twenty twenty six,
twenty twenty seven, then the US store market is just
(16:14):
way too expensive. So there are incentives to move out anyhow.
Speaker 1 (16:19):
So we know that when you are involved in the
foreign exchange, it's always a pair that you're talking about
a dollar related to another currency. And I'm wondering if
we can talk about the path of the dollar to
the downside, I'm wondering what currencies will benefit on the
strong side beyond the Japanese n.
Speaker 4 (16:37):
So if you look at emergent markets in the last
couple of months, emergent markets currencies that the author quality
carry trade, and I'm talking about those from Brazil, Mexico
and South Africa, they have been rallying the most. It's
a sign that the carry trade is back and the
people are using the dollar as the funding currency to
(16:58):
buy into higher currencies.
Speaker 1 (17:01):
Surely will leave it there. It's always a pleasure. Thank
you so very much. Bloomberg Opinion columnist Shuley Wren joining
us here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
and geopolitics in the Asia Pacific. You can find us
(17:23):
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. The US equity market
climbed to all time highs in the last session. That
was after Wednesday's FED raid cut, and money flowed into
(00:21):
riskier corners of the market. Look at small cap shares,
they simply soared. We had the Russell two thousand jumping
two and a half percent, closing at its first record
high since twenty twenty one. Now this index is home
to some of the riskiest and most indebted companies in
the market. At the same time, today, we had the Dow,
the S and P and the Nasdaq finishing at records.
(00:42):
In a moment, we'll take a look at how Stephen
Myron's appointment to the FED could lead to a weaker
dollar and benefit em currencies. I'll be joined by Bloomberg
opinion columnist Shuley Wrenn, but we begin here in the States.
Joining me now is sham zavsal Managing director at the
Carnegie Investment Council. Chams is on the line from Toledo, Ohio.
(01:03):
Thank you so much for making time to chat with me.
It's very interesting to look at what happened in the
bond market today. Yes, we had a rally in equities,
but yields were up across the curve. And this seems
to be tied to the idea Chams that the Fed
is going to allow the economy to run hot. Is
there some danger here though.
Speaker 2 (01:22):
There could be. I'm not quite there yet in terms
of overreacting to a single day move, but it can
be very much interpreted that way. So if you look
at the dot plot, obviously from yesterday, while we did
get an extra cut expected for this year from a
concessus standpoint, twenty twenty six is really essentially flat, right.
(01:45):
If you look at the consensus for twenty twenty six,
most people are still gravitating towards barely any movement from
where they leave off in twenty twenty five. So that
should potentially keep things in check. But you know, the bondmark,
it has widely been known as be home for more
sophisticated investors than equity, so we have to pay attention
(02:06):
that we cannot ignore the bond market.
Speaker 1 (02:07):
Of course, Yeah, Powell call this move a risk management cut,
but he also reiterated the danger of those tariff hikes
creating a persistent uplift in inflationary pressures. And that's I
think maybe what was being expressed in the Wednesday session
after the Fed's decision, because we also had yields pushing
a little higher. Are we looking at a situation where
(02:30):
stagflation is a possibility?
Speaker 2 (02:34):
You know, it depends. You know, when we think about
the spending of where it's coming from. One dollar worth
of spending is the same, you know, whether it comes
from one source or five different sources. Right, So, while
we are not so enthused with the idea that the
AI team is really worth powering a good chunk of
the economy, but you know, generally GDP calculation will be
(02:57):
fairly neutral to where this boost comes from. My assessment
is that for stacklation to truly take shape, we're going
to have to a c change in terms of the
hype that we have seen over the last couple of
years towards data center build out. That number is so
substantially high. The fact that it's likely going to touch
(03:20):
one percent of US GDP, most likely in twenty twenty
six keeps me at bay from thinking that stackflation is
around the corner. But I wouldn't be betting that we're
going to skirt by a recession over the next twelve months.
Speaker 1 (03:35):
Either, well, let's stay with that. I'm wondering whether or
not you believe, given the ferocity of investment in AI infrastructure,
whether investors are going to see an ROI a return
on investment.
Speaker 2 (03:48):
Well, I think the corporations themselves are seeing it. Now.
I'm not speaking about the owners of the lms at
this point because that's a whole different story altogether. But
when you see the way really Fortune five hundred is
deploying these things, Obviously there's customer service, and then there
is the sort of the first level, brand new graduate
(04:11):
analytical abilities. These are the areas where you're going to
see a lot of weakness, I think over the next
couple of years in terms of the job market, because
that's where I think this suset some of the substantial
gains in productivity is going to come from. Whether you
look at whether it's the health insurance industry, whether it's
just a simple chat bot being deployed across the board,
(04:33):
or the agentic AI, the no code AI agents that
are being deployed to handle a variety of tasks across
the board. I think there's some significant productivity gains awaiting
around the corner. So I think Fortune five hundred is
pretty good. As far as the small businesses that may
be still running on Windows eleven, excuse me, windows ten
(04:56):
or older, I think there's going to be a significant
dichotomy between how the rest of America ends up using
the advancements in AI versus how Fortune five hundred ends
up using.
Speaker 1 (05:08):
Well, speaking of small companies, we had a rally in
the Russell two thousand today. It was up about two
and a half percent, as I indicated a moment ago.
Give me your sense on whether this was a little
bit of a short squeeze here or whether the market
is genuinely convinced that there is going to be kind
of a resurgence and some time of economic activity that
(05:29):
would justify pushing small cap stocks higher.
Speaker 2 (05:32):
Well, you know, it's probably not a great idea to
read too much into a single day move, but you know,
as you mentioned that Russell two thousand is home to
a lot of unprofitable companies and therefore risk your companies,
high speculation biotech, and frankly a lot of regional banks
and mortgage companies for that matter. I think the way
(05:56):
we are sort of absorbing this turn of events is
essentially to say that look from a historical perspective, when
the FETs have cut raid, they have generally done it
when it's already too late. So historically speaking, you would
have found over the last thirty forty years that a
rate cut happens and then we slide into a recession.
I think Chairman Powell is going to be one of
(06:18):
those you know, people celebrated, I think in later years,
because he has had now three different incidents where he's
had the chance to raise rates. The first two times
he did not drive the economy into a recession. We'll
see how it looks this time around. My sense is
that goldilocks economy that's growing at around one point seven
(06:39):
to one point nine percent, Corporate America still crunching in
double legit, you know, profit gains, obviously aided by the
weaker US dollar. All of this does lend itself to
Russell two thousand finally catching you know, some some ray
of sunshine. So I think there's some leg some lamentum
that could build up if you do at a goldilocks economy.
(07:02):
While we are expecting rate cuts at least four rate
cuts between now and maybe summer of next year.
Speaker 1 (07:08):
So what about the broader equity market today S and
P five hundred at a record high and the pe
of around twenty five times earnings, That seems to be
a little frothy.
Speaker 2 (07:20):
Very much so. Obviously, the waiting on megacaps is also
the highest event since frankly eighteen nineties. If you go
back to the last fifty years, on average, the top
ten names by market cap has trended around twenty five
to twenty eight percent. As of July of last year.
The last time I took a look at this, the
(07:41):
top ten names comprised of thirty eight percent of the index. Right,
so if the mega caps that are all participating in
this AI hiph are going to be the ones to
be the largest names within an index, you can imagine
why we're going to get a little bit stretched on
the valuation front. Thing that still concerns me as much
(08:02):
because the rest of the index is really around nineteen
to twenty times, and that's manageable. If you know you
had seven or eight sectors out of the eleven all
trading over twenty twenty one time's earnings, that would be
more reason to worry than frankly, knowing that the market
is concentrated, and as long as the AI boom is happening,
(08:23):
you could look the other way. But boy, watch out.
When this hardware build out is about to complete its
full cycle, that's when the concentration may not be working
for investors as much.
Speaker 1 (08:35):
So having said all of that, chums, give me an
investment strategy that you think will be effective over the
next six to twelve months.
Speaker 2 (08:44):
Well, I would say that mega center banks are going
to be, you know, a good place to invest at
this point. The valuations are not eye watering, and I
think between the prospect of just having a better spread
in net interest margins as well as the prospect of
(09:04):
deregulation over the remainder of the term from the administration,
both votes well for financials. Obviously, I think we are
still early stage in AI. So to the extent that
you were able to find names that have not completely
certain gotten blown off with this eyewatering rally, I think
(09:26):
there may be some deals there. I think AMD may
have given us an opportunity today as a result of
the news between Nvidia and Intel, and so a pockets
of opportunity within tech, certainly financials, and I wouldn't completely
ignore consumer discretionary at this point because the first half
(09:47):
was very subdued in terms of economic participation. I think
the second half will be much better, and we think
twenty twenty six may actually carry the momentum. So there
should be some really strong name, both in retail or
otherwise within the discretionary sector that can really make, you know, investors,
you know, goals come through for the next year.
Speaker 1 (10:08):
What about foreign markets? We have President Trump returning from
the UK, A lot of big tech deals were just announced.
Are you inclined maybe to look for opportunities outside of
the US right now?
Speaker 2 (10:20):
You know, it's we have really been underweight in international
as a firm for the longest time. And while we
felt that, you know, maybe a year ago Mexico would
have been an opportunity and maybe some parts of Asia
would have been post tariffs, we're not so sure. And
(10:42):
when we look at our multinationals here and how they
are speaking about where the momentum is across the world,
we're not really seeing bright spots out of really any
place in Europe. Perhaps maybe Poland into some degree, but overall,
you know, it's a very much a very tepid market
(11:04):
that is basically burdened by excessive regulation. And so we're
just going to be waiting and seeing on whether there's
a truly sort of a change of mindset in terms
of how they think through the next twenty thirty years. Otherwise,
I think the US remains the best bank for the
buck as far as we're concerned.
Speaker 1 (11:22):
Okay, Shams, we'll leave it there. Bank for the buck
in the US. Shams Avzal is Managing director at the
Carnegie Investment Council. Joining us on the line from Toledo,
Ohio here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Krisner. Now, the fed's
(11:45):
recent decision to cut its policy rate by a quarter
point was nearly unanimous. The newly installed Governor, Stephen Myron,
though dissented in favor of a half point reduction. Now
that is something President Trump has been demanding for months.
Myron was sworn into the fed's board on Tuesday morning,
just in time for the meeting. He has taken unpaid
(12:06):
leave from his role as chair of the White House
Council of Economic Advisors to help us understand what Myron's
new role may mean for markets. I'm joined by Bloomberg
opinion columnist Shuley Wren, who joins us from Hong Kong.
Surely it's always a pleasure. Thank you so very much.
I know you're writing about Myron's policy where the dollar
is concerned. Fill me in a little bit.
Speaker 3 (12:28):
He's definitely a dollar beer.
Speaker 4 (12:30):
He blamed the US society's various economic problems, from the
loss of manufacturing to wealth inequality.
Speaker 3 (12:38):
To the overvaluation of dollar.
Speaker 4 (12:41):
In a very well read paper published the last November.
He basically called that He basically said that the dollar
is overvalued and that it should not be acting as
a reserve currency. And that's very much freaking global investors out.
Like what we're seeing is that the FED was holding
(13:02):
the raids right throughout this year until Wednesday, but the dollar,
the Broader Dollar Index has come down twelve percent already.
Speaker 1 (13:12):
Do you think he's likely to have much in a
way of influence while he's sitting on the FED Spoard
of Governors.
Speaker 3 (13:19):
He is only one of the seven members.
Speaker 4 (13:21):
However, his rhetoric and the fact that the Trump will
get to decide on the next feed chre does do
influence market narratives, and you are actually seeing it already.
Speaker 3 (13:35):
For instance, Goal is on.
Speaker 4 (13:37):
Trying to take over US treasuries as a global central bank's.
Speaker 3 (13:41):
Biggest reserve assets.
Speaker 4 (13:43):
That's a sign that the global investors are trying to
hatch against the instability at the federal reserve. And also
what you are seeing is that the global asset managers
are increasingly keen to diversify overseas into international stocks, from
Europe to Hong Kong.
Speaker 1 (14:04):
So, to be fair, surely the dollar has been in
a bit of a down trend for much of the year.
How much of that is due to forces maybe that
Myron or anyone else would not be able to control.
Speaker 4 (14:17):
I think that's a very fair question. What you see
with dollar is that it tends to exhibit very long
term major cycles, with the boom and the bus faces
lasting over a decade. So it does seem that the
dollar has peaked somewhere in twenty twenty two, and the
consensus is that, you know, after the last boom, which
(14:40):
lasted over a decade, the dollar may be entering a
bar face. I will only say that the Trump's economic
policies and his attitude towards the Federal Reserve is speeding
up that decline.
Speaker 1 (14:52):
So I mentioned that Myron is on lee from his
role as chair of the White House Council of Economic Advisors.
And we know a cornerstone of Trump's economic policies have
to deal with tariffs. And I'm wondering whether we need
to talk a little bit about the tariff story as
it relates to the dollar as well.
Speaker 3 (15:09):
Well.
Speaker 4 (15:10):
And that's another problem, right, Like in the past, a
lot of foreign governments they ended up holding a lot
of dollar because they were exporting their goods and services
into the United States. But if the terror boar is
set up, there is less need for them to hold
dollar anymore. In fact that there will be in the
case of China, there will be few opportunities to earn dollar.
Speaker 3 (15:33):
Right.
Speaker 4 (15:33):
That means that there is a lot of selling pressure
on the green back.
Speaker 1 (15:38):
So if we step back and we look at the
shift that is happening right now in global markets, is
this a time where many, I will say, especially institutional investors,
are diversifying, and perhaps some of that diversification is moving
assets out of the US.
Speaker 4 (15:54):
I think we are already seeing that already Europe and
China have been doing very well this year. And it's
also in part because the US dollar market has become
very expensive, right Like if the AI boom is not
showing up in the earnings in say twenty twenty six,
twenty twenty seven, then the US store market is just
(16:14):
way too expensive. So there are incentives to move out anyhow.
Speaker 1 (16:19):
So we know that when you are involved in the
foreign exchange, it's always a pair that you're talking about
a dollar related to another currency. And I'm wondering if
we can talk about the path of the dollar to
the downside, I'm wondering what currencies will benefit on the
strong side beyond the Japanese n.
Speaker 4 (16:37):
So if you look at emergent markets in the last
couple of months, emergent markets currencies that the author quality
carry trade, and I'm talking about those from Brazil, Mexico
and South Africa, they have been rallying the most. It's
a sign that the carry trade is back and the
people are using the dollar as the funding currency to
(16:58):
buy into higher currencies.
Speaker 1 (17:01):
Surely will leave it there. It's always a pleasure. Thank
you so very much. Bloomberg Opinion columnist Shuley Wren joining
us here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
and geopolitics in the Asia Pacific. You can find us
(17:23):
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
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